The installer on a 201204 LMDE Live CD is unable to see a virtio disk when running inside a KVM image (disk /dev/vda for example). This error and the bug fix was reported and acknowledged on the following post at least by Apr/2011. The fix is to run the command $inxi -U (as root). Hopefully this simple command can be added to the next Live-CD release.

====Justin Krehel (jkrehel) wrote on 2011-04-21:This has been added. In the live environment, you can open a terminal and issue the following command:

sudo inxi -U

This will update the inxi script, which is used in live-installer for disk detection. Subsequent versions of LM Debian Edition will contain the updated script, but for now this should handle the issue.

That's pretty amazing this problem still exists, considering I helped patch inxi for virtio over a year and a half ago, and all someone had to do was run an inxi -U from the live environment before spinning the ISO.